European private equity firm to buy Ancestry.com for about $1.6 billion

CP

Genealogy website Ancestry.com has agreed to be acquired by a group led by European private equity firm Permira Funds in a cash deal valued at about $1.6 billion.

The offered price of $32 per share is a nearly 10 per cent premium over Friday's closing price of $29.18. Ancenstry.com's shares jumped 7.8 per cent, or $2.28, to $31.46 in afternoon trading Monday.

The company operates a website for researching family history and has more than 2 million paying subscribers. It says more than 10 billion records have been added to its site over the past 15 years. The company develops and acquires systems that digitize handwritten historical documents, and it works with government archives, historical societies and religious institutions around the world.

Earlier this year, Ancestry.com created a nationwide name index from the 1940 U.S. Census after the National Archives posted it online. The index makes it easier for researchers to look up digital images of the actual census forms on Ancestry.com's website because they don't need a subject's exact address.

Cantor Fitzgerald analyst Youssef Squali called Ancestry.com "the world's largest online resource for family history" in a recent note.

Ancestry's services were used on the NBC show "Who Do You Think You Are?" which tracked celebrities as they researched their family history. Ancestry.com also was a sponsor of the show, and its shares took a hit in May, when NBC said it would not renew for a fourth season.

But Squali said the show will likely be revived on a cable network.

The company went public in 2009. Last year, it earned $62.9 million, or $1.29 per share, on nearly $400 million in revenue.

Ancestry.com said Monday the $32-per-share buyout offer represented a 41 per cent premium over its closing price in early June before reports surfaced that the company had retained a financial adviser for a possible sale. Company shares have climbed from around $21 in early June and hit a 52-week high of $33.80 in early August before dropping back.

In July, The New York Times had reported that Ancestry.com was in talks with Providence Equity Partners and TPG Capital, as well as Permira, about a possible deal.

Citi analyst Mark S. Mahaney said in a research note he didn't anticipate a new bidder emerging for the company "given that the sales process appears to have been ongoing for at least (four) months."

Mahaney said he has long viewed Ancestry.com as an attractive asset. He noted that the company has an increasing global presence and "a significantly under-penetrated market opportunity."

Ancestry.com said there will be no anticipated changes in its operating structure with the deal. The company will remain based in Provo, Utah, and it will continue to focus on investing in content, technology and expanding product offerings in areas like DNA.

CEO Tim Sullivan and Chief Financial Officer Howard Hochhauser will keep a majority of their equity stakes, and Spectrum Equity will remain an investor. Spectrum owns a 30 per cent stake in the company.

The company expects the deal to close early next year. It will announce third-quarter earnings on Wednesday.